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Construction

July

2011

JOINT INTEREST PRIVILEGE

BETWEEN JOINT VENTURE PARTIES

London

Paris

Rouen

Brussels

Geneva

Piraeus

Dubai

Hong Kong

Shanghai

Singapore

Melbourne

Sydney

Perth

Joint venture parties tend to forget that when

the honeymoon is over and disputes arise

between them, either party may seek from the

other disclosure of relevant communications

they have exchanged with their own

lawyers or other external advisors. Unless

appropriate steps are taken beforehand, such

communications are not necessarily protected

by legal professional privilege.

In Australia, this issue came under scrutiny on

24 April 2011 in the case of Alliance Craton

Explorer Pty Ltd v Quasar Resources Pty Ltd &

Anor [2011] SASC 90. Alliance was in dispute

with Quasar, its joint venture partner, in relation

to a native title mining agreement which

Alliance asserted Quasar was not authorised

to enter into on behalf of the joint venture. It

sought production of documents generated

by Quasar, and an associated company

(Heathgate), which included communications

between Quasar and Heathgate and their

lawyers. Quasar asserted legal professional

privilege over the documents. Alliance argued

seven grounds on which privilege did not

apply, the following three of which were

considered by the court:

1. The legal advice which gave rise to the

privilege was sought or received by Quasar

or Heathgate, as agent for the joint venture.

2. In relation to certain of the documents,

Alliance contributed to the cost of the legal

advice which was sought or received.

3. Even if the documents were originally

privileged, there had been a waiver of

that privilege in relation to most of the

documents, by reason of Quasar’s and

Heathgate’s disclosure to the Department

of Resources as part of an application for a

mining lease of the legal advice which they

had received.

Legal advice giving rise to privilege sought

and given as agent

Alliance contended that the privilege attaching

to the documents was jointly shared with


Quasar and Heathgate. Joint privilege

prevails against third parties but not

as between those sharing in it 1 . The

court, citing Sheller JA in Farrow

Mortgage Services Pty (in Liq) v

Webb 2 , referred to two alternative

circumstances in which joint privilege

may arise:

1. Where the parties join in

communicating with a legal

advisor for the purpose of

retaining his services or obtaining

advice.

2. If one of a group of persons

in a formal legal relationship

communicates with a lawyer

about a matter in which the

members of the group share an

interest.

Sheller JA’s first alternative

As to the first alternative, Alliance

argued that the existence of an

agency between Quasar and the

joint venture (and therefore between

Quasar and Alliance) meant that the

lawyers retained by Quasar were

also retained by Alliance. The court

rejected this, noting that “it does not

follow from the appointment of an

agent to carry out some task that all

contracts entered into by the agent

which are directed to the fulfilment

of that task are contracts which bind

the principal”. It was clear in this

case from the correspondence that

no retainer or relationship existed

between Quasar and its lawyers, who

at least on a subjective level never

considered Alliance to be their client.

On this basis, the court held that joint

privilege under this first alternative

failed.

Sheller JA’s second alternative

As to the second alternative, the court

took the view that it was a question of

fact in each case whether there was

a shared interest. In some cases, the

parties’ interests are not sufficiently

aligned for such an interest to arise.

For example, they may have sought

the advice in different capacities (e.g.

where a trustee seeks advice which

concerns his character not as trustee

but as mortgagee, the advice will be

outside the otherwise joint interest

with the trust) or where they are

opposed (for example, a company

seeking advice in an action against

a shareholder will be outside the

otherwise joint interest with the trust).

The factual enquiry required the

court to consider whether a duty or

obligation to disclose was implicit in

the relationship between the parties.

Was there an implied shared interest

Quasar argued that there was no

implied shared interest because the

advice sought from its lawyers was

for its own private purposes. While

accepting the argument in principle 3 ,

the evidence however did not

support this position: no witness had

deposed to giving or receiving advice

for Quasar’s own private purposes

(whether this was an omission or

because it reflected the facts is

not clear). The evidence appeared

to show that, in all instances, the

advice was requested and provided

in pursuit of the interests of the joint

venture. A joint interest privilege

therefore prevailed and Alliance

was entitled to disclosure of the

communication between Quasar,

Heathgate and their lawyers.

Contribution towards legal costs

The court also observed that Quasar

had sought a contribution from

Alliance to meet the costs of the legal

advice which, although not of itself

conclusive, supported a conclusion

that the firm was retained for joint

rather than private purposes.

Waiver

Alliance contended that even if

there was no joint privilege, Quasar

has waived its privilege over the

communications. The waiver was

said to arise from the provision of

a single piece of legal advice to the

Department of Primary Industries and

Resources of South Australia (PIRSA)

over which Quasar did not claim

privilege and which Alliance claims

amounts to a waiver of privilege in

all communications with Quasar’s

lawyers.

Quasar relied on the Victorian

Court of Appeal’s decision in British

American Tobacco Australian

Services Ltd v Cowel [2002] VSCA

197 that a waiver occurs when

the other documents sought are

necessary for a proper understanding

of the disclosed material. While the

court favored the broader test in

AWB Ltd v Cole (No. 5) [2006] FCA

1234, which considered whether the

released material represents “the

whole of the material relevant to

the same issue or subject matter”,

the overriding factor was one of

fairness. The court noted that the

disclosure to PIRSA was in relation to

a discrete topic and it would be fair

to allow Quasar to retain privilege in

documents concerning other topics.

1 Phipson on Evidence, 14th Edition.

2 (1996) 39 NSWLR. 3 Chatry Martin v Martin [1953] 2 QB 286.

02 Construction


What lessons can be learned

If joint venture parties wish to seek

to preserve privilege in relation

to advice from external advisors

concerning their own private interests

then, ideally, this should be set

out in a retainer letter. Where there

is an existing retainer which is in

general terms, it should be updated

to include the private advice being

sought Another solution would be to

agree a communication protocol that

clearly demarcates the boundaries of

the joint privilege.

For more information, please contact

Nick Longley, Partner, on +61 (0)3

8601 4585 or nick.longley@hfw.com,

or Brian Rom, Associate, on

+61 (0)3 8601 4526 or

brian.rom@hfw.com, or your usual

contact at HFW.

Notwithstanding these possible

arrangement parties should be aware

that an Australian court will look at

the substance of the relationship

between the parties rather than

the terms of the retainer letter or

protocol. If the communications in

question are so intertwined with the

joint interests, then, on the basis of

current authorities, no amount of

careful drafting will avoid disclosure.

Where that is the case, parties should

exercise caution when discussing

matters internally or with external

advisors where these discussions

could later form the subject of a

dispute. Although often difficult

or impractical to achieve, where

sensitive documents are in issue or

are likely to be generated, advice

should be taken prior to the creation

of such documents.

While a joint venture can often start

out as having all the hallmarks of a

“marriage made in heaven”, they can

end up in divorce and acrimony. It is

therefore important to protect against

the consequences and seek legal

advice at an early stage to protect, as

far as possible, against disclosure of

sensitive documents.

Construction 03


Lawyers for international commerce

HOLMAN FENWICK WILLAN

Level 41, Bourke Place

600 Bourke Street

Melbourne

Victoria 3000

Australia

T: +61 (0)3 8601 4500

F: +61 (0)3 8601 4555

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